The economic drivers of commodity market volatility

Marcel Prokopczuk; Andrei Stancu; Lazaros Symeonidis

doi:10.1016/j.jimonfin.2019.102063

The economic drivers of commodity market volatility

Marcel Prokopczuk, Andrei Stancu, Lazaros Symeonidis

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Abstract

We analyze the relationship between economic uncertainty and commodity market volatility. We find that commodity market volatility comoves strongly with economic and financial uncertainty, especially during recessions. Variables associated with credit risk, financial market stress, and fluctuations in business conditions bear significant predictive ability for commodity market volatility. The documented predictability is mainly observed in the period after the financialization of commodity markets (i.e. post–2004) and it peaks during the 2008–2009 global financial crisis.

Original language	English
Article number	102063
Journal	Journal of International Money and Finance
Volume	98
Early online date	13 Jul 2019
DOIs	https://doi.org/10.1016/j.jimonfin.2019.102063
Publication status	Published - Nov 2019

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10.1016/j.jimonfin.2019.102063

Accepted_ManuscriptAccepted author manuscript, 871 KBLicence: CC BY-NC-ND

Cite this

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title = "The economic drivers of commodity market volatility",

abstract = "We analyze the relationship between economic uncertainty and commodity market volatility. We find that commodity market volatility comoves strongly with economic and financial uncertainty, especially during recessions. Variables associated with credit risk, financial market stress, and fluctuations in business conditions bear significant predictive ability for commodity market volatility. The documented predictability is mainly observed in the period after the financialization of commodity markets (i.e. post–2004) and it peaks during the 2008–2009 global financial crisis.",

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AB - We analyze the relationship between economic uncertainty and commodity market volatility. We find that commodity market volatility comoves strongly with economic and financial uncertainty, especially during recessions. Variables associated with credit risk, financial market stress, and fluctuations in business conditions bear significant predictive ability for commodity market volatility. The documented predictability is mainly observed in the period after the financialization of commodity markets (i.e. post–2004) and it peaks during the 2008–2009 global financial crisis.

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JO - Journal of International Money and Finance

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